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Can We Become A Millionaire Just By Avoiding Cars?

I am currently driving 6 year old Toyota Corolla and recently thought about buying a new car, one that gives a very good mileage just like my Corolla. But then again, if I can drive my Corolla for several more years, I realized I could be saving a lot of money without much effort. The only thing I will be losing is my pleasure of driving a new car.

Then I became more curious about how much drivers spend in their lifetime on cars. Below is the break-down of my calculations. My calculation is more on the conservative side as I did not add any insurance and I used fixed 6% annual return rate every year. You could be very surprised…

So what does this mean? Are we really spending more than one million dollars on cars in our lifetime? The total principal amount spent during 50 years lifetime is slightly below $300,000 if we were to buy cars every 5 years. If we become frugal and bought a car every 10 years, the principal amount drops to below $200,000. If you take this principal amount from not buying a car every 10 year and start investing, you could grow your investment over $700,000 next 50 years. For those who buys a new car every 5 years, you could grow your investment over $1 million.

Everyone knows in reality we cannot live/work without cars in the U.S. However, sometime I hear and read about some people living and surviving with less than $20,000 earned income per year. Without owning and maintaining a car, maybe this is really possible. As you can see, car expense is really high. With some creativity, maybe you can start cutting cost associated with cars and start saving/investing the extra cash.

Very interesting break down on the cost of a car over our lifetime! I currently drive a 6 year old car and have no plans on trading it in any time soon. I haven’t had a car payment in over 2 years and I don’t think I could ever go back to having one!

You are right, the only thing we lose is the pleasure of driving a new car. Since I luckily don’t live in my car, I’m fine with driving an older car as long as I can!

You’re right about car payments. It is so nice not to have car payments and if I were to purchase a new car, there will be car payments again. With some good maintenance on my current car, it should easily last 3-4 more years.

All cars will last longer than we think. We buy a new car in many cases because we are bored with the old one. My current cars are 17 & 15 years old. They could easily last another 10 years. I spend very little on them. So buying every 10 years is quite reasonable.

I assume that the amount spent increasing is due to an inflationary factor. Thus the cost in the 10 year portion of the spreadsheet should actually be higher. It shouldn’t match the cost in the 5 year portion all the way across the top. Correct me if I am missing something.

This shouldn’t alter your calculations by much but would affect it a little.

You are correct. What I did was assume 10% increase every time you purchase a new car. This calculation was never meant to be exact but rather just to give you some taste of what could happen if you were not to own a car for lifetime.

That is impressive to see. Our current car is 7 years old, and we haven’t had a loan payment on it for 3 years. I am hoping to buy our next car with cash so we can get out of the car loan cycle, but I’ll wait until this car dies first. 🙂

We only have one car which was paid off this year. It is easy enough to get by with one if you are used to it. No car could be a fair bit harder. At the moment our 18 month old is doing a great job of redecorating the interior with food scraps, so I don’t plan on getting another any time soon!

We have three cars, all at least 11 years old. My husband is a mechanic so he has the skills to keep the vehicles running and maintained. We keep three vehicles because we need one as a back up in case one of the cars goes down.

Very impressive indeed. We currently have two older cars. One is 7 years old and the other is 5 years old. We bought the 5 year car off my mother in law for a really cheap price. Now the only thing we need to pay on both cars is maintenance and insurance. We try to drive less than most in an effort to be greener.

We must be working towards that goal, as both our vehicles are past going on 12 years old. If we lived closer to work, say two or three miles, I’d have half a mind towards selling one and riding a bike. Maybe.

Awesome insight. I think it’s a much better suggestion than the classic, “skip the cup of coffee everyday to become a millionaire” line of thought. I recently bought a Hyundai Elantra and plan to make it last until electric cars have become all figured out (15-20 years).Awesome insight. I think it’s a much better suggestion than the classic, “skip the cup of coffee everyday to become a millionaire” line of thought. I recently bought a Hyundai Elantra and plan to make it last until electric cars have become all figured out (15-20 years).

Interesting idea however, most people spend the savings on other things. It does illustrate the possibilities and the consequences of our decisions. I wonder how many people would buy a new car every 5 years if presented with the opportunity cost of investing that monthly payment?

Very interesting, but there is several points to consider :
– With the older car you will spend more money on the maintenance (particularly after 5 years).
– You won’t loose your old car completely, when you buy new one.
– Where could you get 6% interest on your investments?

If you would add current inflation rate (2%) + administration fees (1-2%) – you will get 4% a year, as the current stock market performance you might end up having negative returns.

I recently did some calculations on the investments of $ 40, 000 a year at the current market performance – you are basically earning next to nothing or even loosing money. Life is collection of experience and every so often you need to spoil yourself with something, as incentive to work harder.

FI, Thanks for your comment. You made couple of good points. Regarding maintenance, I assumed $1125 for every 5 years. It’s not perfect but I felt this number suffices for this calculation. You’re right bout trade in value but I assumed you probably will not get much, probably couple of thousands… This trade in kind of evens out the insurance cost which I did not add to the calculation. And finally the 6% annual rate of return… Historically, you get about 8% annual return in long term investment. Consider investing for more than 20,30, 40 years. You should be able to get 6% with no problem. I agree in current market, you will lose money in investing but this is only short-term. Even with $40,000 in the current market, if you are a smart investor then you’ll find ways to make money even in this down market. You should consider investing options like Short or Options trading despite their volatility.

We used to run older cars that were a bit upmarket but got badly stung by a Saab 9000 and a Mercedes C Class when the repair bills came in. So we switched to new or newer cars on the basis that we didn’t have repair bills at all. Worse – we switched to two new cars!

The trick of course is to get rid of a car just before something major happens – new gearbox, whole set of tyres, etc. Some people manage it I know – we generally buy them!! 🙂

But we don’t drive much – our A Class Mercedes is 2 years old and hasn’t done 10,000 miles yet and we are back to one car. We largely work at home, live between the city centre and the airport on a banana bus route because they always come in bunches and they are building a tram system here in Manchester at long last.

I drive a 1998 car (it turns 14 next year). It looks old but runs beautifully. Why on earth would I trade it in for a shiny new car, rather than invest that money or spend that money on pursuing my true passions (world travel, etc)?